Prudential Financial’s (PRU) stock has risen by 7% in the past month and has fallen by 13% in the past quarter. The company has seen revenue contraction and lower profitability due to a strong dollar and lower investment income.
The company is expected to report EPS (earnings per share) of $2.4 in 1Q16 compared to EPS of $2.79 in the prior year’s quarter. In 2016, Prudential is expected to generate EPS of $10.0 backed by growth in retirement offerings.
The stock is currently trading at a PE (price-to-earnings multiple) of 7.3x compared to the 12x–14x ratios of other major insurance players. The stock is trading at 7.2x as of 2016, as the company is expected to report similar earnings this year compared to 2015.
In 4Q15, Prudential’s revenues fell 16% year-over-year to $13.2 billion. It reported net income of $735 million, or $1.9 per share, compared to a net loss of $1.5 billion in the prior year’s quarter. On a constant dollar basis, the company saw growth of 7% in its international insurance business.
The hike in the interest rate could result in higher investment income for the company. However, it could also partially offset gains from its international business on account of a strong dollar.
Insurance and asset management
Prudential Financial has ~$1.2 trillion worth of assets under management as of December 31, 2015. It has operations in the United States, Europe, Asia, and Latin America. The company’s product offerings include retirement-related services, mutual funds, life insurance, investment management, and annuities. Prudential Financial offers these products and services to institutional and individual customers through proprietary and third-party distribution networks.
The Americas remain the major contributor toward the company’s top line. In the United States, Prudential Financial’s competitors include ACE (ACE), Chubb (CB), and Allstate (ALL). Together, these companies form 0.63% of the iShares MSCI ACWI ETF (ACWI).
Prudential Financial’s investment portfolio consists of public and private fixed maturity securities, equity securities, commercial mortgages and other loans, and other invested assets.